Cover 4 B - Rimbunan Sawit Berhadrsb.listedcompany.com/newsroom/Rimbunan_Sawit_Berhad... · 2018....

SUSTAINING WELLNESS

2017 RIMBUNAN SAWIT BERHAD691393-U ANNUAL REPORT

C o n t e n t sVision & Mission

Location of operations

corporate structure

corporate inforMation

chairMan’s stateMent

ManageMent Discussion anD anaLysis

profiLe of Directors

Key senior ManageMent

sustainabiLity stateMent

corporate goVernance oVerView stateMent

234568

17212228

stateMent on risK ManageMent anD internaL controL

report of the auDit coMMittee

stateMent of Directors’ responsibiLities for preparing the annuaL financiaL stateMent

financiaL stateMent

aDDitionaL coMpLiance inforMation

List of properties

anaLysis of sharehoLDings

notice of annuaL generaL Meeting

proxy forM

36

3942

43139

140141145

AnnuAl RepoRt 20172

Vision & Mission

Vision

to be progressive plantation and agri-business group

Mission

• To enhance stakeholders’ values.

• To provide high quality products and services to our customers.

• To provide job opportunities and lifelong learning opportunities at the workplace and local community.

Corporate Values:

1. Quality (both our products and services)2. Integrity

3. Teamwork4. Family values

5. Result-oriented

AnnuAl RepoRt 2017 3

LocaTIons oF opeRaTIons

AnnuAl RepoRt 20174

Jayamax Plantation Sdn Bhd

neScaya Palma Sdn Bhd

novelPac-Puncakdana Plantation Sdn Bhd

timreSt Sdn Bhd

WoodiJaya Sdn Bhd

lumiera enterPriSe Sdn Bhd

Baram trading Sdn Bhd

PJP Pelita BiaWak Plantation Sdn Bhd

Pelita-SPlendid Plantation Sdn Bhd

PJP Pelita ekang-Banyok Plantation Sdn Bhd

PJP Pelita lundu Plantation Sdn Bhd

PJP Pelita Selangau Plantation Sdn Bhd

PJP Pelita ulu teru Plantation Sdn Bhd

r. h. Plantation Sdn Bhd

rSB Palm oil mill Sdn Bhd

rSB lundu Palm oil mill Sdn Bhd

raJang agriSuPPlieS Sdn Bhd

raJang BuilderS Sdn Bhd

rakantama Sdn Bhd

rimBunan SaWit management ServiceS Sdn Bhd

toPline Synergy Sdn Bhd

Burung tiong helicoPter Sdn Bhd

Corporate struCture

Plantation

otherS

mill

100%

100%

100%

100%

100%

100%

100%

85%

85%

70%

60%

60%

60%

60%

100%

100%

100%

100%

100%

100%

100%

100%

85%

rimBunanSaWit

Berhad

Palm oil Sector

FormaSi aBadi Sdn Bhd


coRpoRaTe InFoRMaTIon

tiong chiong ong(chairman/ non-independent non-executive Director)

tiong kiong king(Vice chairman/ non-independent non-executive Director)

tan Sri datuk Sir diong hiew king@ tiong hiew king(executive Director)

auditorS

crowe horwath (af: 1018)chartered accountants1st floor no.1Lorong pahlawan 7a2Jalan pahlawan96000 sibu, sarawak

Stock exchange liSting

Listed on Main Market of bursa Malaysia securities berhadStock name: rsawitStock code: 5113

PrinciPal BankerS

rhb bank berhadMalayan banking berhadbank of china (Malaysia) berhadhong Leong bank berhadciMb bank berhadpublic bank berhadbank pertanian Malaysia berhadambank (M) berhadalliance bank Malaysia berhadAffin Bank Berhad

dato’ Jin kee mou(Chief Executive Officer)

tiong chiong ie(non-independent non-executive Director)

Bong Wei leong(independent Director)

tiong ing ming(independent Director)

comPany SecretarieS

toh ka Soon (Maicsa 7031153)

voon Jan moi (Maicsa 7021367)

regiStered oFFice

north wing, Menara rimbunan hijau101, pusat suria permata, Jalan upper Lanang96000 sibu, sarawaktel: 084-218555Fax: 084-219555e-mail: [email protected]: www.rsb.com.my

Share regiStrar

symphony share registrars sdn bhdLevel 6, symphony housepusat Dagangan Dana 1Jalan pJu 1a/4647301 petaling Jayaselangor Darul ehsantel: 03-78418000Fax: 03-78418152

Board oF directorS

AnnuAl RepoRt 20176

it was a bright start to 2017 with our crude palm oil (“cpo”) price continued its uptrend, surpassing the rM3,100 per metric tonne level while palm Kernel (“pK”) and fresh fruit bunches (“ffb”) also trending the same wavelength as cpo, edging closer to rM3,100 per metric tonne and rM650 per metric tonne respectively in quarter one 2017. the promising trend was eventually interjected by the buoyant economic growth resulted in the strengthening of our local currency and the unexpected double repercussions from the india’s import tax hike on edible oils and eu’s resolution to ban palm biodiesel by 2020.

cHaIRMan’s sTaTeMenT

dear ShareholderS,

on behalf of the board of Directors of rimbunan sawit berhad, it is my privilege to put forward to you the annual report of our company and Group for the financial year ended 31 December 2017.

internally, the group has chalked up new heights in key areas. our rM324.4 million revenue is the highest since 2011 with our cpo production bettering the mark set in 2006. our earnings before interest, taxation, Depreciation, and amortisation (“ebitDa”) continued to recover by 66% to rM68.5 million. Despite overshadowed by the impairment conundrum, which triggered our pre-tax loss of rM164.4 million, the group is striving steely to realign its resources and to consolidate its portfolio of assets so to ensure our target of double digit ffb yield remains intact.

annual rePort 20176


outlook and Prospect

our revenue remains on track to achieve higher growth in 2018 substantiated by cpo production, which is expected to increase by another 80%.

the group remains prudent on the cpo price in view of the continuing strengthening of ringgit against usD. Market demand for CPO is expected to remain firm as the impacts from the import tax hike and proposed ban on palm biodiesel are to be buffeted by improved world economic growth.

acknowledgements

My sincere gratitude and appreciation for the dedicated supports and confidence that the Group has garnered from our shareholders, valued customers and suppliers, business partners, bankers, government agencies and all the other stakeholders.

on behalf of the board of Directors, we acknowledge and thank all the employees of rimbunan sawit berhad for their efforts and continuous commitment to the group.

tiong chiong ongchairman

cHaIRMan’s sTaTeMenT (conT’d)

AnnuAl RepoRt 20178

ManaGeMenT dIscUssIon and anaLYsIs

Overview of Business and Operations, Objectives and Strategies

the group’s core activities remain as cultivator of oil palm and operator of palm oil mill. to be a progressive player in this plantation industry, the group remains committed to transcend stakeholders’ value as we continue to improvise products and services of high quality underpinned by the positive vibes that have been imputed through-out our workplace and the local community.

Our Corporate Structure

Follow-up to our previous initiative to streamline the Corporate Functions at Head Office level, our Corporate Structure revolves around six vital Enablers that spearheaded by CEO Office, which ensure all Enablers work hand in glove and in line with the direction set by board of Directors.

RIMBUNAN SAWIT’S CORPRORATE STRUCTURE

Plantation (Kuching &

Sibu)

Palm Oil Mill& Engineering

Plantation (Miri - Zone 1)

Plantation (Miri - Zone 2

& 3)

CorporateFinance

HumanResource &

Administration

CEOOFFICE

to enhance the cohesiveness among the enablers, the group continues to invigorate the supporting units including information technology, agricultural practices, internal audit, purchasing, transportation, geographic information system, Land and public relations.

Our Plantation Estates

total planted area expanded by 168 hectares to 55,278 hectares, representing 61% of our total land bank of 90,940 hectares. the land bank has been adjusted downward by 1,373 hectares as compared to last year, following the issuance of permanent land title on 13 february 2017 for our Lumiera estate consisting of area with 4,698 hectares replacing the previous provisional lease title, which constitute an area of 6,071 hectares.


ManaGeMenT dIscUssIon and anaLYsIs (conT’d)

the following charts entail our planted area by age cluster and region.

for our palm age, more than 45% are in prime mature cluster while another 40% are below aged of seven years. the old palms continued to weigh on our yield by adding another 2,816 hectares to the old mature cluster. as such, the group has kick start the replanting program since 2014 at our bakong estate. as at 31 December 2017, 1,021 hectares have been replenished with high-yielding seedlings while the remaining 3,417 hectares are to be completed within three to four years. the next in line is timrest estate with 4,251 hectares, which is slated for replanting, commencing from 2019 onwards.

in 2016, the group has initiated the review of our plantation’s value chain as part of our three main initiatives to enhance our crops collection and distribution channels. Mechanization has becoming more vital as the manpower conundrum continues to badger our operation.

as such, the group has loaded another thirteen units of mini crawlers and tractors to facilitate and spur the crops evacuation while another twenty five units of heavy machineries such as excavators, tractors, and loaders have been brought on-board to expedite the ground works preparation including compaction and levelling, which is expected to be ready by 2019. More importantly, all the developments at replanted areas have been tailored to pave the way for mechanization.

the pursuit for mechanization has to be elevated to other operating processes as the group is venturing into mechanizing its fertilizer and chemical application. aside from mechanization, our pre grading of crops harvested has been refined to reaffirm the quality of the crops delivered to mills while the implementation of bin system to facilitate the collection and evacuation of crops at peat soil areas has been put in the pipeline.

The Group has intensified its effort towards sustainable and best agricultural practices across its estates. During the year, our Jayamax estate has completed the 2nd stage Malaysian sustainable palm oil (Mspo) audit under the siriM QAS certification body, in which the certification was obtained in February 2018. In addition, the rest of our estates have commenced preparatory works for Mspo 1st stage audit.

MIRI

Old mature (>20 yrs)

Immature (1-3 yrs)

Young mature (4-7 yrs)Prime mature (8-19 yrs)

32,186 ha

4,280 ha

7,095 ha 11,350 ha

13,922 ha

11,839 ha26,058 ha

25,558 ha

10,286 ha13,240 ha

13,240 ha

9,684 ha

9,684 ha

32,354 ha

RegionAgeCluster

KUCHING

SIBU

2016 20172016 2017

AnnuAl RepoRt 201710


Our Palm Oil Mills

our mills situated in Miri region, namely rhp palm oil mill (rhpoM) and rsb palm oil mill (rsbpoM). rsbpoM made its mark in May 2017 with trial production and subsequently booked its first commercial sales in July 2017. The following chart depicts the profile of our Mills.

RSBPOMRHPOM

• Commenced in 1998• 80 metric tonne per hour

• ISO 9001:2008 standard• MSPO certification in progress

• Commence composting plant in 2017 to recycle mill’s waste into plant nutrients for estate manuring.• Equip flue filtering system by 2019 to regulate gas emission from boiler.

• Commenced in 2017• 60 metric tonne per hour

• MSPO certification in the pipeline• Crops’ grading in line with MPOB guidelines

• Production in early stages. Waste management program to be formulated based on mill progress.• Flue filtering system to be installed by 2019.

Operation &Capacity

Certification &Compliance

Sustainability &Environmental

Our Ongoing Corporate Proposals

in 2016, one of the group’s three key initiatives is to reexamine its business model and to relook into its portfolio of estates and mills from the aspects of feasibility and returns. subsequently, on 22 february 2017, the group has entered into agreements to acquire Lundu palm oil mill situated in Kuching and sastat estate located in Miri while at the same time, disposing our simunjan estate in Kuching region (“corporate proposals”).

the completion of the corporate proposals is conditional upon securing the approval and consent from the relevant authorities on the transfer of the Licence rights for simunjan estate and the Lundu Land title for the Lundu palm oil mill. the timeline to complete the conditions precedent as stipulated in the agreements was initially extended to 21 february 2018 on 21 august 2017 and eventually, it was set to 22 february 2019 based on mutual agreements by all the relevant parties.

the extensions were required due to some technical aspects of the licence rights and the land title that require extensive clarity and conformity. The Group has intensified the correspondence with the relevant authorities and is expecting the corporate proposals to go through by fourth quarter of 2018.

in ensuring that our initiative would not be hamstrung in entirety by the timeline, the group has conferred the operating and commercial rights of simunjan estate to palmlyn sdn. bhd. (“palmlyn”), a related party in exchange for a monthly flat rate (“FFB Fee”) charged via our subsidiary, Timrest Sdn. Bhd. commencing April 2017. The move has to be prodded considering that the group has to shift it resources and focus on areas that have been earmarked in our earlier initiative.

concurrently, we took a step in advance by engaging rh Lundu palm oil Mill sdn. bhd. (“rhLpoM”), a related party as their contractor to manage the Lundu palm oil mill in return for a monthly contract income receivable via our subsidiary, rsb Lundu palm oil Mill sdn. bhd. (“rsbLpoM”) commencing april 2017. on 19 January 2018, rsbLpoM has secured its Mpob licence to operate, process, and sell all the produces from Lundu palm oil mill, which will further boost our group’s revenue

282

1,61458 58

5147

39

1,643 1,653

1,600

1,469

870 874814

748

618240

Revenue(RM’ million)

184

251

324

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016

2016

2016

2016

2017

2017

2017

2017

Total Assets(RM’ million)

Owners’ Equity(RM’ million)

Net Assets Per Share(RM’ sen)



Review of Financial Results

The following charts highlight our five-year key financial information.

282

1,61458 58

5147

39

1,643 1,653

1,600

1,469

870 874814

748

618240

Revenue(RM’ million)

184

251

324

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016

2016

2016

2016

2017

2017

2017

2017

Total Assets(RM’ million)

Owners’ Equity(RM’ million)

Net Assets Per Share(RM’ sen)



Our Financial Performance

the group notched another 30% growth in 2017 for its revenue to arrive at rM324.4 million. the resounding growth was mainly propelled by the rM49.0 million increase in cpo sales as the selling volume climbed by another 32% to 65,814 metric tonne backed by 4% improvement in the average selling price of rM2,691 per metric tonne. our pK sales have chipped in rM8.9 million of the growth on the back of higher volume sold by 42% despite lower average selling price of rM2,319 per metric tonne as compared to 2016 of rM2,439 per metric tonne. More importantly, our rsbLpoM has contributed rM14.3 million of the growth in the form of contract income receivable from rhLpoM.

cost of sales surged by 23% to rM301.1 million mainly due to the rM34.9 million jump in ffb purchased from external parties, which approximate 1.8 times of 2016’s volume. the upsurge was also driven from higher plantation administrative expenses and manuring costs, which was in correspond to higher round of manuring completed. with the growth outweigh the upsurge, our Gross Profit (“GP”) soared from RM5.1 million to RM23.3 million, bolstered by higher gp margin of 7% compared to 2016 of 2%.

Despite the soaring gp, our pre-tax loss swelled by rM87.3 million to rM164.4 million owing mainly to the administrative costs, which was bloated with impairment losses as shown in the following charts.

Depreciation & Amortisation

Head Office Costs

Goodwill

PPE

Staff Costs12.5(19%)12.8(8%)

8.9(14%)9.8(6%)

2.7(4%)2.6(2%)

22.3 (17%)

33.8 (26%)

4.0 (10%)

7.6 (18%)

2.7 (7%)

2016 (65.1) 2017 (157.1) 2016 (41.0) 2017 (131.9)

AdminCosts

(RM’ million)

ImpairmentLosses

(RM’ million)

Impairment Losses

Intangible Assets

Receivable (Lubuk Tiara)

131.9 (84%) 41.0 (63%)

12.3(30%)

14.4 (35%)

Biological Assets75.8 (57%)

the impairment losses have to be effected after taking into account the recoverable amount that have been measured in accordance with financial reporting standard (frs) 136 – impairment of assets, which is less than the carrying amount of the respective assets including biological assets (“ba”), property, plant and equipment (“ppe”), and goodwill.

the recoverable amount measured is based on the respective asset’s value in use, which is mainly hinge on the projected cpo price, ffb yield per hectare, remaining useful life of the asset, and discount rate used to estimate the future cash flows to be expected from the asset.



as our initiative is to relook into our plantation assets lock, stock, and barrel together with all the number crunching to best estimate their value in use, the group was compelled to impair seven of its plantation estates as enlisted in the following table.

BA PPE Goodwill(RM'million)Biawak 26.8 58.4 85.2 46.9 (38.3) 16.7 10.6 Jayamax 82.6 39.5 122.1 85.3 (36.8) 31.4 5.4 Lundu 24.2 88.0 112.2 93.7 (18.5) 6.7 2.0 Selangau 27.9 33.2 61.1 39.1 (22.0) 10.2 11.8 Selangor 75.7 - 75.7 62.2 (13.5) 10.2 3.3 Splendid 3.6 8.5 12.1 9.3 (2.8) 0.6 0.7

TOTAL 240.8 227.6 468.4 336.5 (131.9) 75.8

ImpairmentAllocation

33.8

11.0-9.8--1.5

22.3

Shortfallsubject to

ImpairmentRecoverable

Amount

TotalCarryingAmount

RevaluationSurplus(Group)

Net BookValue

(Company)ESTATE

Our Lundu and Biawak estates

Lundu and biawak have been exerting positively to the group’s result. for Lundu, 20% of its planted area is under old mature while another 60% will be approaching old mature in two to three year times. similarly for biawak, almost three quarters of its planted area will be entering old mature by 2020. With less than five productive years to be spared and further compounded by diminishing FFB yield, their estimated recoverable amount is insufficient to cover their carrying amount.

Our Jayamax, Selangau, and Selangor estates

Jayamax has half of its planted area aged more than 16 to 19 years old while selangau has more than 75% in that age cluster, which indicates that both will be approaching old mature in one to three year times. as for selangor, almost 90% is classified as old mature. Their FFB yields have been significantly low and consistently flattish, which may stifle any recovery potential from their limited lifespans. as a consequences, their performance have been aggravated resulted in lower recovery amount estimated as compared to their carrying amount.

for splendid estate, the planted area aged 17 years old and is fast approaching old mature in three-year times. Logistically, the estate is less than accommodative, which render eclectic set of challenges to our resources. ffb yield continued to dwindle while its performance has been peripheral, which have pulled down its estimated recovery amount.

Back to our pre-tax loss, the increase has also been exacerbated by higher finance cost, which widen by 80% to RM22.6 million mainly due to lower quantum of finance costs capitalized under BA in line with additional planted area declared mature in 2017.

The Group’s loss after taxation fixed at RM155.8 million, an increase of RM80.0 million compared to 2016 after incorporating higher tax income of rM8.6 million as compared to 2016 of rM1.4 million. the increase in tax income is mainly arising from reduction in deferred tax liabilities by rM24.5 million.


Our Financial Position

the group’s non-current assets contracted by rM304.8 million mainly due to the rM131.9 million impairment losses provided on the BA, PPE, and goodwill. In addition, we have reclassified RM143.8 million from non-current assets to assets classified as held for sale for all the BA, PPE, and intangible assets in relation to our Simunjan estate. The reclassification was provided in view that the Corporate Proposals will be accomplished by fourth quarter of 2018.

trade receivables retracted by 36% as compared to 2016 of rM20.3 million mainly attributable to prompt collection of CPO, PK, and FFB sales to refineries and mills. On contrary, other receivables, deposits and prepayments inflated by rM36.8 million to rM54.2 million mainly due to the rM33.6 million deposit advanced to rhLpoM arising from the corporate proposals.

trade payables surged by 16% to set at rM70.4 million as purchase of fertilizers was stepped up towards end of the year. other payables, deposits and accruals enlarged by rM41.5 million to rM75.2 million as a result of the rM30.0 million security deposit received from palmlyn under the ffb fee arrangement. further than that, the group has received rM15.0 million refundable deposit from tiasa Mesra sdn. bhd. in relation to the corporate proposals.

the group’s total borrowings reduced marginally by rM0.4 million to rM584.9 million. During 2017, the group has paid down the term loans and bankers’ acceptance by rM39.0 million and rM7.2 million respectively. apart from that, the group has drawndown additional rM43.5 million revolving credit to bridge our working capital in view of the expanding milling activities. Our outstanding hire purchase has also increased by RM1.8 million in line with the fleet of machineries acquired for mechanization.

Despite marginal change to our total borrowings, the group’s debt to equity ratio has increased to 0.93 times as compared to 0.74 times in 2016. The increase was mainly attributable to the significant drop in our total equity as a result of the impairment losses. however, the gearing ratio is expected to trim down in 2018 in anticipation that the corporate proposals will be completed by fourth quarter of 2018.

The following is an overview of our Group’s key financial indicators for the past five financial years.

key Financial indicators 2017 2016 2015 2014 2013 (RM’thousand) revenue 324,392 250,573 184,209 239,684 282,234 ebitDa 68,479 41,184 29,505 77,587 62,939 Profit/(Loss) after taxation (155,766) (75,729) (67,175) 2,753 (1,892)equity attributable to owners 617,504 747,701 814,366 874,311 869,541 total assets 1,468,588 1,600,136 1,652,814 1,642,537 1,613,877 borrowings 584,853 585,205 557,330 483,218 455,625 Debt to equity ratio 0.93 0.74 0.64 0.51 0.48 earnings / (Loss) per share (sen) (6.38) (3.27) (2.94) 0.23 0.11 net assets per share (rM) 0.39 0.47 0.51 0.58 0.58



Review of Operating Activities


29.51

2015

-49.89

66.36

41.18

2016

-54.29

73.82

2017

68.48 Mill69%

-2.82-4.09

Mill75%

-1.12CPO71%

1.55

Denote impact to EBITDA:

0.57

CPO66%

-2.33 11.22

PK18%

PK12%FFB

9%

ContractIncome

19%Others2%

Others3%

Estate30%

Estate24%

Trading1%

Trading1%

-

20

40

60

80

100

120

Revenue Cost ofSales

OtherIncome

DistributionCosts

AdminExpenses

Share ofResults in

anAssociate

(Net of Tax)

Revenue Cost ofSales

OtherIncome

DistributionCosts

AdminExpenses

RM'million

Decrease Increase

EBITDA CONTINUES ITS GROWTH TRAJECTORY WITH ANOTHER 66% IMPROVEMENT IN 2017

EBITDA excludes finance costs, depreciation, amortisation, taxation & non-current assets impairment impacts

Remarks:

RIMBUNAN SAWIT BERHAD

our group delivered another 66% growth in its ebitDa on the back of buoyed revenue as cpo production stoked by 37% to land at 67,374 metric tonne, the best since 2006. Likewise, our pK production has increased by 46% to 15,470 metric tonne, the highest since 2013. the production for ffb has recovered by 3% equivalent to 11,872 metric tonne despite conferring our simunjan estate to palmlyn under the ffb fee arrangement in april 2017. as such, our ffb yield improved marginally by 1% from 7.89 metric tonne per hectare to 7.94 metric tonne per hectare.

The following table highlights key operating indicators for the past five years.

key operating indicators 2017 2016 2015 2014 2013 cpo production Volume (Mt) 67,374 49,105 40,739 43,936 67,214 pK production Volume (Mt) 15,470 10,595 9,206 10,782 16,592 ffb production Volume (Mt) 357,052 345,180 396,561 436,380 479,751 oer (%) 20.14 20.31 20.35 20.03 20.62 Ker (%) 4.62 4.38 4.60 4.92 5.09 Mature area (ha) 44,992 43,760 43,072 39,122 36,867 ffb yield per ha (Mt/ha) 7.94 7.89 9.21 11.15 13.01 cpo sales Volume (Mt) 65,814 49,706 39,524 46,818 69,591 pK sales Volume (Mt) 14,896 10,502 9,310 10,598 16,831 ffb processed (Mt) 334,506 241,782 200,153 219,306 326,016

if excluding the contribution from simunjan estate for both 2017 and 2016, the ffb production volume would be adjusted to 351,514 metric tonne and 313,154 metric tonne respectively. this demonstrated a recovery of 12% amounting to 38,360 metric tonne from 2016 to 2017. concurrently, our adjusted ffb yield would indicate an improvement of 9% from 7.68 metric tonne to 8.41 metric tonne.



Anticipated or Known Risks

risks remain an integral part of our day-to-day undertakings. Due to its dynamism, the group has constantly review and rejig its approaches to ensure these risks are properly addressed and alleviated. our risks are categorized into four main categories mainly market risks, operational risks, regulatory risks, and liquidity risks.

risk category

market

operational

regulatory

liquidity

description / rationales

fluctuation of cpo price due to changes in currency exchange rate, foreign government policies (such as import tariff), and restrictions imposed on palm oil usage.

shortage of labor remains a pivotal challenge to the plantation estates due to increase competition while inclement weather can be damaging depending on its scale.

changes in government policies and regulations can be a double-edged sword such as those related to hiring of foreign labor, compliance to Mspo, and cpo export tax suspension.

the group’s gearing ratio has been on the upward trend as our borrowings have increased while our equity has contracted partly due to the impairment losses.

impact

reduction in revenue that will significantly deteriorate our ebitDa

ffb yield and quality in terms of oer will be adversely affected resulted in lower returns

additional costs incurred to employ foreign workers. Monetary repercussion for non-compliance

higher funding costs with limited room to maneuver our working capital requirement

mitigation Plans

the group will relook into the cost and benefit of hedging into crude palm oil futures (fcpo) considering the enhanced flexibilities that was recently announced by bursa Malaysia.

it has been our key initiative since 2016 to focus on mechanization in our plantation estates so as to allay and balanced the estate dependencies on manpower.

the group remain committed to enhance the efficiency of its operation including mechanization and ensure compliance with Mspo requirement by 2019.

one of our key initiatives is to relook into our portfolio of assets so as to realign our resources on productive areas. with our corporate proposals near completion, other plans are in the pipeline to enhance our liquidity.

Forward-looking Statements

the group has been gearing towards maximizing our revenue as clearly demonstrated in our initiatives. having secure the Mpob licence for rsbLpoM in January 2018, the group is expecting higher turnover for 2018 anchored by our cpo sales. with our rsbpoM still in the earlier stage of production since commissioning in May 2017, any improvement in terms of consistency and stability will be a shot in the arm for our cpo production.

in terms of cpo price, the group remains cautious due to the ongoing strengthening of ringgit Malaysia against the us Dollars, the direction of the import tax set by india on edible oil, the potential repercussions from european union’s proposal to ban palm oil from biodiesel from 2021, and the uncertainty arising from the trade war between china and united states.

Dividend Policy

in considering that the group is still in loss after taxation position, we did not recommend dividend to be paid for the financial year ended 31 December 2017. In fact, the Group will continue to reinvest any excess operating cash flows to improve our plantation estates especially for those undergoing replanting so to ensure continuous growth and sustainability in our yield, and more importantly, is to tone down our debt to equity ratio.

dato’ Jin kee mouChief Executive Officer


tan Sri datuk Sir diong hieW king @ tiong hieW kingAged 83 / Male / Malaysian

Executive Director

tan sri Datuk sir Diong hiew King @ tiong hiew King was appointed to the board of rimbunan sawit berhad (“rsb”) on 14 february 2006 and was subsequently appointed as executive chairman on 15 february 2006. on 19 December 2012, he was redesignated as executive Director of rsb.

tan sri Datuk sir tiong is a businessman with vast and extensive experience in various business sectors including media and publishing, oil and gas, mining, fishery, manufacturing, information technology, timber, tree plantation, oil palm plantation and mills.

over the years, tan sri Datuk sir tiong has started and built up the rimbunan hijau group of companies (“rh group”). Currently, he is the Executive Chairman and Managing Director of RH Group, a large diversified conglomerate which has interests in various businesses in Malaysia comprising of timber harvesting, processing and manufacturing of timber products, plantations and other businesses around the world.

tan sri Datuk sir tiong is the founder of an english newspaper named the national in papua new guinea. he is currently the president of the chinese Language press institute Limited. in June 2009, he was bestowed the Knight commander of the Most excellent order of the british empire (K.b.e.), which carries the title “sir”, by Queen elizabeth ii of the united Kingdom, in recognition of his contribution to commerce, community and charitable organisations. in 2010, he was awarded “Malaysia business Leadership award 2010 – the Lifetime achievement award” by the Kuala Lumpur Malay chamber of commerce, in recognition of his entrepreneurship and his contribution to the country. tan sri Datuk sir tiong is the executive chairman of sin chew Media corporation berhad (“sin chew”), a wholly-owned subsidiary of Media chinese international Limited, a company listed in Malaysia and hong Kong. he is also the chairman of the board of trustee of yayasan sin chew, and currently serves as the executive chairman of rh petrogas Limited, a listed company in singapore. he also serves as a director of other private limited companies.

pRoFILe oF dIRecToRs


tiong chiong ongAged 59 / Male / Malaysian

Chairman / Non-Independent Non-Executive Director

Mr. tiong chiong ong was appointed to the board of rsb on 14 february 2006 and was subsequently appointed as Managing Director of rsb on 15 february 2006. on 1 october 2015, he was redesignated as non-executive chairman of rsb.

Mr. tiong graduated with a bachelor of Law and economics from Monash university, australia in 1984 and joined rh group in 1986. he started his career as a chambering student and underwent chambering at skrine and co. in Kuala Lumpur for nine (9) months. he is a member of cpa australia and is a member of the Victorian and sarawak bar and the Malaysian institute of accountants.

Mr. tiong is a businessman with extensive experience in various capacities in the timber and plantation industries. he also holds directorship in several private limited companies.

under his leadership, rsb was presented the 2012 top award for the best performing stock in the plantation sector by the eDge billion ringgit club, Malaysia.

in 2013, Mr. tiong was presented the ipD hrD Leadership award by the institute of professional Development, open university Malaysia in acknowledgement and in recognition of his exemplary leadership and outstanding contribution to the promotion of human capital Development efforts in the plantation industry.

pRoFILe oF dIRecToRs (conT’d)

tiong kiong kingAged 70 / Male / Malaysian

Vice Chairman/ Non-Independent Non-Executive Director

Mr. tiong Kiong King was appointed to the board of rsb on 14 february 2006 and was subsequently appointed as non-independent non-executive Vice chairman on 15 february 2006. he is also the chairman of remuneration committee and a members of audit committee and nomination committee.

Mr. tiong is a businessman with extensive managerial experience in the timber industry in various capacities. he joined the rh group in 1975 where he has held various positions including being a Director in one (1) of the subsidiaries of rsb since December 1997.

Mr. tiong also sits on the boards of subur tiasa holdings berhad, a public listed company and several private limited companies. currently, he also holds key posts in several non-government organizations. amongst others, he is the honorary president for sibu chinese chamber of commerce and industry, Vice president of world federation of fuzhou association Limited, Life honorary president of persekutuan persatuan-persatuan foochow sarawak, honorary chairman of the world Zhang clan association Limited and chairman of persatuan Klan Zhang negeri sarawak.



dato’ Jin kee mouAged 52 / Male / Malaysian

Chief Executive Officer

Dato’ Jin Kee Mou was appointed chief executive Officer of RSB on 1 July 2015. He is the Chairman of Risk Management committee.

Dato’ Jin graduated with a bachelor of engineering in civil and computing Degree from Monash university, australia in 1990. he is a member of institution of engineer Malaysia.

Dato’ Jin started his career in engineering consultancy and subsequently obtained his professional qualification (p.e) in 1996. he joined Jaya tiasa holdings berhad as an engineer in 1995 and facilitate engineering and project management globally. he is also actively engaged with business development in Jaya tiasa group especially the development of oil palm business.

when Jaya tiasa group began diversifying into the oil palm business in 2004, Dato’ Jin was entrusted to lead the establishment of plantations and crude palm oil mills. he has more than 12 years of extensive experience and in-depth knowledge in oil palm industry.

tiong chiong ieAged 47 / Male / Malaysian

Non-Independent Non-Executive Director

Mr. tiong chiong ie was appointed to the board of rsb on 14 february 2006. he is also a member of remuneration committee.

Mr. tiong graduated with a bachelor of business in information system from Monash university, australia in 1994.

Mr. tiong is a businessman with more than 20 years of managerial experience in the timber, transportation provider and shipping industries. he joined the rh group in 1996. he also holds directorships in hornbilland berhad and several private limited companies.



Bong Wei leongAged 50 / Male / Malaysian

Independent Director

Mr. bong wei Leong was appointed to the board as an independent Director of rsb on 14 february 2006 and was subsequently appointed as chairman on 19 December 2012. on 1 october 2015, he relinquished the position as chairman of rsb and remained as independent Director. he is the chairman of audit committee and nomination committee. he is also a member of remuneration committee.

Mr. bong graduated with a bachelor of business (accountancy) and bachelor of Law from Queensland university of technology, australia in 1993. he was a Partner of a public accountants firm prior to starting his own practice in 2004. he is a member of the Malaysian institute of accountants and the cpa australia.

Mr. bong is a businessman with more than 24 years of experience in providing auditing, accounting and taxation services to various clients. he also sits on the board of ccK consolidated holdings berhad, a public listed company.

tiong ing mingAged 60 / Male / Malaysian

Independent Director

Mr. tiong ing Ming was appointed to the board as an independent Director of rsb on 14 february 2006. he is a members of audit committee and nomination committee.

Mr. tiong graduated with a bachelor of building (hons) from university of Melbourne, australia in 1982 and began his career in a consulting quantity surveying practice since 1994. he is a registered quantity surveyor of the board of Quantity surveyors, Malaysia and a member of the institution of surveyors Malaysia. he also sits on the board of subur tiasa holdings berhad, a public listed company.



Other Information on Directors

1. Family relationship

tan sri Datuk sir Diong hiew King @ tiong hiew King and tiong Kiong King are brothers and is the father and uncle of tiong chiong ong respectively. both tan sri Datuk sir Diong hiew King @ tiong hiew King and tiong Kiong King, and tiong chiong ong are the uncles and cousin of tiong chiong ie respectively. apart from these, the other Directors have no family relationship with each other or the major shareholders of rsb.

2. Conflict of Interest

None of the Directors has any conflict of interests with the Company.

3. convictions of offences

None of the Directors have been convicted of offences within the past five (5) years other than traffic offence, if any.

4. details of attendance at Board meetings held in the Financial year ended 31 december 2017

name of directors number of meetings attended tan sri Datuk sir Diong hiew King @ tiong hiew King 3 out of 6 tiong Kiong King 5 out of 6 tiong chiong ong 5 out of 6 Dato’ Jin Kee Mou 6 out of 6 tiong chiong ie 5 out of 6 bong wei Leong 6 out of 6 tiong ing Ming 6 out of 6

KeY senIoR ManaGeMenTtan Sri datuk Sir diong hieW king @ tiong hieW kingExecutive Director

dato’ Jin kee mouChief Executive Officer

The profiles of Tan Sri Datuk Sir Diong Hiew King @ Tiong Hiew King and Dato’ Jin Kee Mou are listed under Profile of Directors on page 17 and 19 respectively of this annual report.


MAR

KET

PLA

CE

ENVIRONMENT

WO

RK

PLA

CE

COMMUNITY

sUsTaInaBILITY sTaTeMenT

rimbunan sawit berhad (“rsb”) established since 2005, together with the group of companies under its wing (“rsb group”), is committed to achieve sustaining wellness as essential strive to obtain the highest level of sustainability of our stakeholders and employees. we have crafted our logo into describing our four essential contributions towards the economic development and prosperity of our local community, providing positive impact for state development, and creating good values at our work place and environment.

as part of rsb group’s mission “to enhance stakeholders’ values, to provide high quality products and services to our customers, to provide job opportunities and lifelong learning opportunities at the workplace and local community”, we pursue high standards on improvement and promoting better operation and responsibility in business practices, managing environmental impacts and meeting the social needs of communities and nation.

rsb group would undertake sustainable and responsible business practices through:- • good business ethics and integrity;• transparent business conducts; • good agricultural practices; and• good legal governance, risk management and

compliance.

to integrate and undertake sustainability responsibilities on environment, we carry out initiatives and practices on mitigating the direct and in-direct environmental impacts of the development and operation of our estates and mills. we secure the resources wisely by adopting adequate protection and conservation values on the natural environment.

a. marketPlace

rsb approaches and recognizes the importance placed by our customers and consumers on food safety, products quality and traceability on the supply chains. traceability demonstrate the control of our operation and has open up market opportunities. we intend to be sustainable with adequate traceability in the palm oil which we offer to our customers.

this also include the traceability of fresh fruit bunches from third party like smallholders that have contributed much to our group.


sUsTaInaBILITY sTaTeMenT (conT’d)

B. environment

rsb group would continue the efforts in conserving riparian zone areas and rehabilitate buffer zone areas with the aim to preserve and protect the fauna and flora in these areas.

with part of the rsb group oil palm estates operating in peat areas, we comply with state and national laws to ensure that the water table monitoring and the prevention of carbon dioxide (“co2”) and methane gas (“ch4”) reduction which is in subscription to high carbon stock (“hcs”) approach and protecting agronomic practicality with the view to long term conservation benefits.

rsb group with best commitment for all oil palm estates and mills will be undertaking to:

• Implement and maintain on environmental management system acclimatizing to Mspo principles and standards, adopting standard operating procedures with best Management practices (bMp) and good agricultural practices (gap);

• Develop oil palm plantation estates only in areas allocated;• Conduct and comply with Environmental Impact Assessment (EIA), Greenhouse Gas (GHG), Biodiversity,

social impact assessment (sia), social environmental impact assessment (seia);• Emphasize zero burning practices in developing plantation estates;• Minimize pollutions of land, water and air.

involvement in livestock farming is one of the best example that exhibits the effort of rsb group to fulfil the commitment to reduce and remove the overdependence on pesticides and hence reducing risk to human health and environmental. the primary objective of introducing livestock farming into the oil palm estates originally was first and foremost to reduce the cost of weeding. thus under the tree crop-livestock integration system, livestock production was not given the necessary attention that would generate optimum animal growth response. however, with recent shift in emphasis towards good grazing management aimed at balancing feed consumption to what is naturally available in the plantations, there is a need to constantly monitor the quantity as well as quality of available forages grazed. with approximately 20,000 hectares of oil palm cultivated in mineral soil, coupled with the growing demand for beef and the need to increase the self-suffiency level of local beef producers, the development of large scale ruminant production under plantation crops offers considerable scope for the expansion of the livestock industry in the country.



present knowledge of livestock integration and soil management practices indicates that cattle can be effectively integrated into oil palm estates. Some of the benefits of livestock integration include savings in weeding cost, reduction of chemical fertilizers and income from the sale of livestock. future integration of livestock in sloping/steep lands will depend on the current progress of the ruminant industry within rsb group.

c. community

enhancing Social Wellbeing of rural community

with its oil palm estates and mills operation at rural areas, rsb group prioritizes its corporate social responsibility (“csr”) on enhancing the social wellbeing of rural communities near its estates and mills. these include maintenance of kampong roads, providing road access, and sponsorships of events organized by rural schools and rural government clinics.

development of ncr land for Joint-venture oil Plantation

through joint-venture projects, rsb had developed thousands of hectares of native customary rights (“ncr”) land into oil palm estates. at most of these estates, job opportunities are prioritized to landowners and local community. some are also engaged as petty contractors on field and upkeep works. rsb has consistently paid out annual incentive to native landowners who participated in the ncr land joint-ventured oil palm estates.

on-Job-training Program in Plantation management

as at 2017, 11 trainees attached with rsb estates for a 2 years on-Job-training (oJt) program, graduated with executive Diploma in plantation Management. the oJt program is a collaboration between rsb, rh academy, and open university Malaysia. More than 300 trainees have graduated through this program since 2013. trainees who had successfully completed their study were recruited to fill up available vacancies at our estates, while others have better opportunities for employment at other oil palm plantation companies throughout sarawak.

Landowners receiving their annual incentives from RSB joint-ventured NCR land oil palm estates


RSB employees participated in blood donation drive organized by Sibu General Hospital


Leadership Training

Orientation at Oil Palm Estate for New Employees

Orientation at Palm Oil Mill for New Employees

Blood donation

rsb employees has been participating in an annual blood donation drive, responding to the request by sibu general hospital to maintain its blood bank.

d. WorkPlace

Staff training and development

rsb group organizes trainings and development programs for its employees based on the findings from the training needs analysis, implementation of new regulatory compliances, industry changes and latest developments in the respective subjects and profession, for the purpose to upgrade and update the skills and knowledge of the employees to face the ever changing challenges in the industry.


recognizing diversity

the company allocates annual budget for organizing of events such chinese new year, gawai Dayak, hari raya puasa, and christmas. we recognise the importance of appreciating and fostering good relationship among employees of diverse ethnics.

Gawai Celebration at Palm Oil MillChristmas Celebration at Head Office


Safety and health

Safety briefings and trainings were conducted continuously for employees to create awareness on safety at work. safe operating procedures are made available and also continuously brief to employees at work sites.

Safety Briefing at Oil Palm Estate


Water Treatment Plant at RSB Palm Oil Mill New Staff Quarter

Football Match


Aerobic Session

Welfare

sports and games were organized for employees to maintain a healthy lifestyle. aerobic and zumba sessions that are organized twice weekly at the head Office to enable employees to have time for exercise. badminton and table tennis games were organized weekly for employees. sports and recreational facilities are provided at the estates and mills. football, volleyball and sepak takraw competitions were organized to foster closer relationship, teamwork, and stay healthy. employees at our estates and mills are provided with free housing, treated water, electricity and basic amenities.


Corporate GoVernanCe oVerVieW stateMent

introduction

the board of Directors (“board”) of rimbunan sawit berhad (“rsb” or “the company”) recognises corporate governance as being vital and important to the success of rsb and its group of companies (“group”) business. they are unreservedly committed to apply the principles necessary to ensure that the principles of good governance are practiced in all of its business dealings in respect of its shareholders and relevant stakeholders.

this corporate governance statement sets out how the company has applied the three (3) principles which are set out in the Malaysian Code of Corporate Governance in respect of the financial year ended 31 December 2017. Where a specific practice of the Code has not been observed during the financial year under review, the non-observation, including the reasons thereof and, where appropriate, the alternative practice, if any, is mentioned in this statement.

PrinciPle a: Board leaderShiP and eFFectiveneSS

1. Board responsibilities

all board members acting on behalf of the company are aware of their duties and responsibilities as board members and the various legislations and regulations affecting their conduct and that the principles and practices of good corporate governance are applied in all their dealings in respect, and on behalf of the company.

The Board has assumed the following principal responsibilities in discharging its fiduciary and leadership functions:

(a) reviewing, approving and adopting a strategic plan for the company, including the sustainability of the group’s businesses;

(b) overseeing and evaluating the conduct and performance of the group’s businesses and assessing whether the businesses are being properly managed;

(c) identifying principal business risks of all aspects of the group’s businesses and ensure the implementation of appropriate internal controls system and mitigating measures to effectively monitor and manage the risks;

(d) ensuring that all candidates appointed to senior management positions are of sufficient caliber and there are programmes in place to provide for the orderly succession of senior management;

(e) overseeing the development and implementation of policies relating to investors relations programme and shareholder communications policy; and

(f) reviewing the adequacy and the integrity of the management information and internal control systems of the group.

it has put in place an annual strategy planning process, whereby Management presents to the board its recommended strategy and proposed business and regulatory plans together with the annual budget for the following year during the board meeting. at the meeting, the board reviews and deliberates upon both Management’s and its own perspectives, as well as challenges Management’s views and assumptions, to deliver the best outcomes.

the board recognises the importance of ensuring a balance of power and authority between the chairman and the Chief Executive Officer (“CEO”). The positions of Chairman (i.e. Non-Executive Chairman) and CEO are held by different individuals with a clear division of responsibility between the running of the board and the company’s businesses respectively. this ensure a balance of power and authority, such that no one individual has unfettered decision-making powers.

the chairman leads the board and is responsible for ensuring the adequacy and effectiveness of the board’s governance process and acts as a facilitator at board meetings to ensure that contributions from Directors are forthcoming on matters being deliberated and that no board member dominates discussion.


Corporate GoVernanCe oVerVieW stateMent (conT’d)

the ceo, supported by the Management committee and senior management team, is responsible for the day-to-day management of the businesses and operations of the group with respect to both its regulatory and commercial functions and implements the group’s strategies, policies and decision adopted by the board, oversees the operations and business management of the group, provides effective leadership and ensure high management competency. the ceo reports to the board on the group performance and operational matters at each quarterly Board meeting. The Board is also kept informed of key strategic initiatives, significant operational issues and the group’s performance.

Both Company Secretaries of the Company are qualified secretaries as required pursuant to Section 235(2) of the Malaysian companies act 2016 and are the members of the Malaysian association of institute of chartered secretaries and administrators (Maicsa). they are competent in carrying out their duties and play supporting and advisory roles to the board and the group on issue relating to compliance with laws and requirements as well as the code of corporate governance. they ensure adherence and compliance to the procedures and regulatory requirements from time to time. they also ensure that meetings are properly convened and deliberations at meetings are accurately and sufficiently captured and minuted, minutes and statutory records are properly kept and updated.

to enhance accountability, the board has established clear functions reserved for the board and those delegated to Management. further details pertaining to the board charter, code of conducts and whistleblowing policies and procedures are set out in the cg report. these documents are made available on the company’s website www.rsb.com.my and will be periodically reviewed and updated to ensure it remains consistent with the board’s objective and responsibilities.

the ceo is the conduit between the board and the Management in ensuring the success of the company’s governance and management functions. the ceo implements the policies, strategies and decisions adopted by the board. the ceo reports to the board on the group performance and operational matters at the board meeting. all board authorities conferred on the Management is delegated through the ceo and the executive Director and this will be considered as their authorities and accountabilities as far as the board is concerned.

ii. Board composition

During the financial year ended 31 December 2017, the Board has seven (7) members, comprising two (2) independent Directors, three (3) non-independent non-executive Directors, one (1) executive Director and one (1) Director/ceo. the board composition complies with the Main market Listing requirements of bursa Malaysia securities berhad that at least two (2) directors or 1/3 of the board of directors of the company, whichever is the higher, are independent directors.

the independent Directors bring to bear objective and independent views, advice and judgment on interests,

not only of the group, but also of shareholders, employees, customers, suppliers and the communities in which the group conducts its businesses. independent Directors are essential for protecting the interests of shareholders and can make significant contributions to the Company’s decision making by bringing in the quality of detached impartiality.

All the Independent Directors fulfil the criterias of independence as defined in the Listing Requirements and the board charter. the board through the nomination committee has assessed the independent Director and is satisfied with the level of independence demonstrated by all the Independent Directors and their ability to act in the best interest of the company. the board therefore believes that balance of power and authority exists within its current structure to sufficiently enable it to discharge its duties objectively.

the tenure of an independent Director shall not exceed a cumulative term of nine (9) years. however, upon completion of the nine (9) years, the independent Director may continue to serve the board subject to the Director’s re-designation as a non-independent Director. in the event the Director is to retain as an independent Director, the Board shall first justify and obtain shareholders’ approval. Our Independent Directors, Mr. Bong Wei Leong and Mr. tiong ing Ming have served as independent Directors of the company for a consecutive term of more than nine (9) years. however, the board concurred that their independence as independent Directors have not been compromised in any way based on the following justifications and recommendation from the nomination committee:



(a) They fulfilled the criteria as Independent Director as stipulated in the Listing Requirements and therefore are able to offer impartial judgement and advice to the board;

(b) they remain independent and vocal, actively participated in deliberations and exercised independent judgement at board and board committee meetings without compromising operational consideration. hence, provide a check and balance to operational management; and

(c) they continue to exercise independent and objective judgement in carrying out their duties as independent Directors and they provide guidance, unbiased and independent views to many aspects of the company and the group’s strategy so as to safeguard the interests of minority shareholders. their long tenure as Independent Directors have no conflict of interest or undue influence from management and interested parties.

having considered the above, the board had recommended both Mr. bong wei Leong and Mr. tiong ing Ming to be retained as independent Directors of the company and such proposal shall be tabled for shareholders’ approval at the forthcoming annual general Meeting.

The Board consists of qualified individual with diverse backgrounds, skills, age and experiences especially in entrepreneurship, plantation and timber industries, sale and marketing, business administration, finance, legal, accounting and taxation. the members of the board with their combine business, management and professional experiences, knowledge and expertise, provide the core competencies to allow for diverse and objective perspective on company’s business and direction.

the board acknowledges that continuous training and education are vital for the board members to gain insight into the state of economy, technological advances, regulatory updates and management strategies. Directors are encouraged to attend continuous education programmes to further enhance their skills and knowledge, where relevant. a budget for Directors’ continuing education is therefore provided each year by the company.

There were also technical briefings/updates on statutory and regulatory requirements from time to time at the board meetings by the company secretaries. all Directors will continue to attend relevant training as may be required from time to time to equip themselves with the knowledge to discharge their duties more effectively and to keep abreast with regulatory and corporate governance developments in the marketplace.

the board has assessed the training needs of the Directors. generally, all Directors must attend at least one (1) training/seminar each year. During the financial year ended 31 December 2017, the Directors have attended appropriate training programmes conducted by external experts and the descriptions of the training/seminar are set out below:

title of training/seminar number of day(s) spent

28th annual palm & lauric oils conference & exhibition price outlook (poc2017) 3 grow and scale your sMe to greatness 1 FX 7 ecenomic outlook briefing by RHB Bank 1 strategic planning and sustainability requirements 1 Mia conference 2017 2 income tax & gst implication & application leveraging the new companies act 2016 1 the companies act 2016 & company secretary practice part ii 2 national tax conference 2017 2 practice assignment of the new & revised gst tax code 1 practical auditing methodology for sMp 2 2018 budget seminar 1



the board has yet to adopt gender diversity policies and targets. however, the company will promote corporate culture that embraces diversity when determining composition of board and employees at all level from diverse pool of qualified candidates. The Board will continue to monitor and review the Board size and composition from time to time and ensure that women candidates are sought in the recruitment exercise. the evaluation of candidates’ suitability are solely based on their competency, appropriate skills, character, time commitment, integrity, contribution and experience in meeting the needs of the company, including, where appropriate, the ability of the candidates to act as independent Directors, as the case may be.

The Nomination Committee will recommend candidates for all directorships to be filled to the Board which involves selection and assessment of candidates for directorships proposed by the ceo and within the bounds of practicality, by any other senior executive or any director or shareholder, interviewing or meeting up with candidates, deliberation by the nomination committee and recommendations by the nomination committee to the Board. The Board may utilizes independent sources to identify suitably qualified candidates if deem necessary.

the nomination committee is chaired by senior independent Director and all the members are non-executive Directors and a majority of whom are independent. During the financial year ended 31 December 2017, the nomination committee has met once.

the board through the nomination committee conducted an annual assessment of the performance of the board, as a whole, board committees and individual Directors, based on a self-assessment and peer approach. from the results of the assessment, including the mix of skills, experience and other qualities possessed by Directors, the board considered and approved the recommendations made by the nomination committee on the re-election and re-appointment of Directors at the company’s forthcoming annual general Meeting. the nomination committee shall assess the independence of all independent Directors annually and report to the board. all assessments and evaluations carried out by the nomination committee in the discharge of all its functions shall be properly documented.

in evaluating the suitability of candidates, the nomination committee considers, inter-alia, the competency, experience, commitment (including time commitment), contribution and integrity of the candidates, and additionally in the case of candidates proposed for appointment as independent Directors, the candidates’ independence.

During the financial year ended 31 December 2017, the Nomination Committee upon its annual review carried out, is satisfied that the size and composition of the Board is optimum and conducive to effective discussion and decision making. there is appropriate mix of skills, experience and core competencies in the composition of the board and that the board has an appropriate number of independent Directors. the nomination committee is also satisfied that all the members of the Board are suitably qualified to hold their positions as Directors of the Company in view of their respective academic and professional qualifications, good character, experience, integrity, core competencies and qualities as well as their time devoted and committed to discharge their roles.

the nomination committee recognizes the importance of the roles the nomination committee plays not only in the selection and assessment of Directors but also in other aspects of corporate governance which the Nomination Committee can assist the Board to discharge its fiduciary and leadership functions.



iii. remuneration

the remuneration committee is principally responsible for setting the remuneration structure and policy for executive Directors and recommending to the board the remuneration of Directors so as to ensure that the company is able to attract and retain its Directors needed to run the group successfully. the components of Directors’ remuneration are structured so as to link rewards to corporate and individual performance in the case of Executive Directors. In the case of Independent Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the individual independent Director concerned.

the board has adopted the Directors’ remuneration policies and procedures, summarised as follows:

(a) The Company aims to set remuneration at levels which are sufficient to attract and retain the Directors needed to run the company successfully, taking into consideration all relevant factors including the function, workload and responsibilities involved, but without paying more than is necessary to achieve this goal.

(b) the level of remuneration for the ceo and executive Directors are determined by the remuneration committee after giving due consideration to the compensation levels for comparable positions among other similar Malaysian public listed companies, business results, experience and individual performance.

(c) no Director other than the ceo and executive Directors shall have a service contract with the company.

RSB recognises the need to ensure that remuneration of Directors is appreciative and reflective of the responsibility and commitment that goes with board membership. the remuneration committee recommends to the board the remuneration package of the Directors. the fees for non-executive Directors are determined by the board as a whole. each individual Director abstained from the board discussion and decision on his own remuneration. the remuneration package is determined in accordance to fair and equitable criteria based on the performance of the Directors and the Directors’ remuneration policies and procedures.

the board is of the opinion that matters pertaining to Directors’ remuneration are of a personal nature. however, in compliance with the Main Market Listing requirements of bursa Malaysia securities berhad (“Listing requirements”), the remuneration of RSB’s Directors for the financial year ended 31 December 2017 were as follows:

Fee Salary Bonus other emoluments total company group company group company group company group company group rm rm rm rm rm rm rm rm rm rm

executive directors tan sri Datuk sir Diong hiew King @ tiong hiew King - 6,000 360,000 360,000 30,000 30,000 600 600 390,600 396,600 Dato’ Jin Kee Mou 55,000 91,600 - 354,000 - 118,000 1,200 66,929 56,200 630,529 non-executive directors tiong Kiong King 75,000 123,850 - - - - 2,000 2,000 77,000 125,850 tiong chiong ong 120,000 174,600 - - - - 1,000 264,950 121,000 439,550 tiong chiong ie 35,000 36,000 - - - - 1,200 1,200 36,200 37,200 bong wei Leong 45,000 45,000 - - - - 2,800 2,800 47,800 47,800 tiong ing Ming 35,000 36,000 - - - - 2,800 2,800 37,800 38,800

the terms of reference of the remuneration committee is available on the company’s website at www.rsb.com.my.



PrinciPle B: eFFective audit & riSk management

1. audit committee

the audit committee (“ac”), formed on 2 March 2006, comprises two (2) independent non-executive Directors and one (1) non-independent non-executive Director. the ac is chaired by an independent non-executive Director, Mr. bong wei Leong. the committee composition complies with the Main market Listing requirements of bursa Malaysia securities berhad that the audit committee must be composed of not fewer than three (3) members and all the ac members must be non-executive directors, with a majority of them being independent directors. the committee has adopted the practice for ac to require a former key audit partner to observe a cooling-off period of at least two (2) years before being appointed as a members of ac and such practice is incorporate in the terms of reference of ac.

the board has adopted an external auditors policy for the ac to assess the suitability and independence of external auditors. the external auditors policy has outlined the criteria and procedures for the engagement, assessment and monitoring of external auditors. the ac is responsible for reviewing, assessing and monitoring the performance, suitability and independence of the external auditors, on an annual basis.

The external auditors have confirmed and assured in writing of their independence to the AC. The AC had assessed the suitability and independence of the external auditors based on the external auditors policy and considered several factors including adequacy of experience, resources of the firm and independence of the external auditors. AC is satisfied with the external auditors’ performance, technical competency, independence and fulfillment of criteria as outlined in the External Auditors Policy. The AC recommended the re-appointment of Messrs. crowe horwath as external auditors for the ensuing year. the board approved the recommendation made by ac for shareholders’ approval at the forthcoming annual general meeting.

audit and non-audit fees paid/payable by the group and the company to the external auditors during the financial year ended 31 December 2017 are set out below:

group company (rm) (rm)

statutory audit fee paid to: - crowe horwath 342,000 65,000 - philip tong & co 36,000 - total (a) 378,000 65,000 non-audit fees paid to: - crowe horwath 71,800 70,000 - crowe horwath (sarawak) tax sdn bhd 69,150 6,900 - tomax tax services sdn bhd 8,200 - total (b) 149,150 76,900 % of non-audit fees (b/a) 39.5% 118.3%


the nature of the non-audit fees incurred by the group and the company are services rendered for reviewing quarterly reports, risk management and internal control statement, disclosure of realized and unrealized profit/loss statement and tax services.

In considering the nature and scope of non-audit fees, AC was satisfied that they were not likely to create any conflict or impair the Auditors’ independence, objectivity and judgment.

During the financial year under review, the AC met with the External Auditor twice (2) without the presence of the other Directors and employees of the group.

ii. risk management & internal control Framework

the board acknowledges its responsibility for the group’s system of risk management and internal control, which is designed to identify, evaluate and manage the risks of the businesses of the group, in pursuit of its objectives. In addition, the system of internal control practised by the Group spans over financial, operational and compliance aspects, particularly to safeguard the group’s assets and hence shareholders’ investments. the system of internal control, by its nature, can only provide reasonable but not absolute assurance against misstatement or loss.

the main features of risk management framework are disclosed on page 37 of this annual report.

in executing the responsibility for the internal control system, the board via the internal auditors and risk Management committee, has adopted procedures to monitor the ongoing adequacy and integrity of the system of risk management and internal control. the effectiveness of the group’s system of risk management and internal control is reviewed on a regular basis by the internal auditors and risk Management committee.

further details on the state of the risk management and system of internal control of the group are presented on pages 36 to 38 of this annual report.

rsb has its in-house internal audit function which is independent of the activities its audit. the internal audit Manager report directly to the audit committee. further details of the internal audit function are outlined on page 41 of this annual report.

PrinciPle c: integrity in corPorate rePorting & meangingFul relationShiP With StakeholderS

i. communication with stakeholders

the board recognises the importance of being transparent and accountable to the company’s shareholders and prospective investors. the various channels of communications are through meetings with institutional shareholders and investment communities, quarterly announcements on financial results to Bursa Securities, relevant announcements and circulars, when necessary, the annual and extraordinary general Meetings and through the group’s website at www.rsb.com.my where shareholders and prospective investors can access corporate information, annual reports, press releases, financial information, company announcements and share prices of the company. to maintain a high level of transparency and to effectively address any issues or concerns, the group has a dedicated electronic mail, i.e. [email protected] to which stakeholders can direct their queries or concerns.



ii. conduct of general meeting

the general meeting, which is the principal forum for shareholders dialogue, allows shareholders to review the Group’s performance via the Company’s Annual Report and pose questions to the Board for clarification. At the general meeting, shareholders participate in deliberating resolutions being proposed or on the group’s operations in general. the chairman of the general meeting invited shareholders to raise questions with responses from the board, senior Management and external auditors. the notice of general meeting is circulated within the prescribed period before the date of the meeting to enable shareholders to go through the annual report, circular and papers supporting the resolutions proposed. special business transacted at the general meeting are accompanying with the explanatory notes to facilitate full understanding of the matters involved. the outcome of the general meeting will be announced to bursa securities immediately.

comPliance Statement

with the introduction of the new code, the board remains committed to inculcating good corporate governance for the group. the group has complied with the code except for those disclosed in this statement. the group will continue to endeavour to comply with all the key principles of the code in its effort to observe high standards of transparency, accountability and integrity.

Statement on nomination committee activitieS

During the financial year ended 31 December 2017, the Nomination Committee has met once and the activities carried out by the Nomination Committee during the financial year ended 31 December 2017 are as follows:

i) reviewed the mix of skills, character, experience, integrity, core competencies and other qualities required for the board as well as their time commitment and board balance.

ii) evaluated the performance and effectiveness of the board including contributions of each individual director as well as the financial controller and the independence of the Independent Directors.

iii) assessed and recommended to the board, Directors who are due for retirement by rotation pursuant to the company’s articles of association, for continuation in service as Directors.

iv) Discussed to formalise a policy on the board and workforce diversity (including gender, age and ethnicity) and discussed the assessment of independent directors who have served for more than nine (9) years for continuance in office as Independent Directors of the Company.

v) Assessed the Financial Controller or person primarily responsible for the management of the financial affairs of group.

vi) evaluated the performance and effectiveness of the board committees.vii) assessed and recommended to the board the training needs and continuing education programme for

Directors.

this statement is made in accordance with the resolution of the board of Directors dated 4 april 2018.



stateMent on risK ManaGeMent and InTeRnaL conTRoL

introduction

in accordance with paragraph 15.26(b) of the Main Market Listing requirement (“Main Lr”) of bursa Malaysia, the board of Directors (“board”) of rimbunan sawit berhad (“the company”) is committed to nurture and support a sound risk management framework and internal controls system (the “system”) and is pleased to enclose the statement on risk Management and internal control which outline the corporate governance practices to safeguard shareholders’ investments and the group’s assets.

roleS and reSPonSiBilitieS

Board of directors

the board acknowledge its overall responsibility in the establishment and oversight of the group’s risk management framework and internal control systems except for the associated company which is not under the control of the board. the board is cognisant of the fact that its role in providing risk oversight sets the tone and culture towards managing key risks that may impede the achievement of the Group’s business goals within an acceptable risk profile. The Board also recognized the facts that the internal control systems are the actions taken by the board and management to manage risk and increase occurrences that established goals will be achieved, rather than eliminate the likelihood of material misstatements or unforeseeable circumstances, fraud and losses.

therefore, due to inherent limitations, it should be noted that the system can only provide reasonable, rather than absolute, assurance that the likelihood of a significant adverse impact on objectives arising from a future event or situation is at a level acceptance to the business.

audit and risk management committee

the board committees such as the audit committee and risk Management committee are established by the board, and they are governed by clearly defined term of references and authority areas within their scope. The Audit and risk Management committees maintain risk and audit given oversight within the group.

risk management department

the group has established the risk Management Department (“rMD”) to assists the board in ensuring the implementation of appropriate systems to manage the overall risk exposure of the group. among others the rMD is responsible for assisting in development of risk management framework, which ensuring all the necessary policies and mechanism included; maintaining the risk register for the Group; monitoring and reporting of the key risks as identified by the Management and facilitate the quarterly risk review.

internal audit department

pursuant to paragraph 15.27 of Main Lr of bursa Malaysia, the internal audit Department (“iaD”) reports directly to audit committee (“ac”). the activities of the iaD are guided by internal audit charter and annual audit plan which developed based on prioritization of the audit universe by using a risk-based methodology and approved by the ac. the iaD monitors compliance with the group’s policies and procedures, applicable laws and regulations, and provides independent assurance on the adequacy and effectiveness of risk assessment and internal control system by conducting regular audits and continuous assessment.


riSk management Function & FrameWork

the group adopts an enterprise risk Management (“erM”) framework which streamline operations to realise business goals of organisation. This ERM provides structures guidance to identify, evaluate, control, report and monitor significant risks faced by orgainisation, including action plans to treat risks are monitored in relation to orgainisation’s appetite. additionally, this framework accords ownership of risk to process owners by engaging every level of the organisation as risk owners of their immediate sphere of risks which aims to approach risk management holistically and mitigating measures to address risks to acceptable levels (using risk register and key performance indicators).

rMD conducts periodic reviews on the group’s risk registers to ensure the risks and their mitigation measures are relevant and also cover responses to significant risks identified including non-compliance with applicable laws, rules, regulations and guidelines, changes to internal controls and management information systems, and output from monitoring processes.

Listed below are the principal risk as a guidelines on risk reporting:

operating risk operating risk management ranges from managing strategic operating risks to manage diverse day-to-day business activities such as production, safety, health and environment sustainability and compliance with laws and regulations.

Financial risk The Group is exposed to various financial risks relating to credit, liquidity, interest rates and etc. Financial Risk involves the Group operating liabilities to the financial results of uncertainty arrangement which unable to repayment of debt and etc.

compliance risk Risk related to meeting global sustainability standards and certification.The Group is committed to achieving compliance of MSPO Guidelines, ISO certified, labour law and other quality standards to achieve excellence in quality management of our business. compliance to these standards will ensure wider market reach with current demand for sustainable palm oil.

environment risk erratic weather conditions impacting operation.

human resource risk our plantation is highly dependent on foreign labour especially from indonesia for its operations. Policy changes, increased competition and intensified scrutiny of labour management may impact our operations turn leads to decrease in sales and profit.

internal audit Function & SyStem

the iaD is responsible for undertaking regular and systematic review the adequacy and effectiveness of the group’s operations and system of internal controls based on annual audit plans which developed based on prioritization of the audit universe as determine using a risk-based approach. all operating units are audited at least twice a year by the internal auditors. the internal audit findings are discussed at management level and management action plans are prepared that adequately address the Internal Audit Function’s recommendations and findings arising from internal audits. the progress of the agreed actions plans have been effectively implemented through its follow-up reviews. The AC reviews all internal audit findings, management responses and the adequacy and effectiveness of the internal controls. the ac reports to the board on a quarterly basis of its deliberations and recommendations.

stateMent on risK ManaGeMent and InTeRnaL conTRoL (conT’d)


During the year under review and up to the date of this statement, the group manages its risks by implementing various internal control mechanisms. the key elements of the internal control systems are as follows:

• The Group has established an organisational structure that is aligned with its business and operational requirements, with clearly defined lines of responsibility and authority levels;

• Relevant senior management have been delegated with specific accountability for monitoring the performance of designated business operating units;

• Policies and procedures and rules relating to the delegation of authority and segregation of duties have been established for key business processes. the group’s policies and procedures are reviewed and revised periodically to meet changing business and operational needs and regulatory requirements.

• Annual business plans and budgets of the Group are prepared by business and operating units, reviewed and approved by the board. the group senior management meets on a monthly basis with operating management to review actual performance and significant variances against budget are monitored on a going basis.

• Regular management and operation meetings are conducted by management which comprises the Chief Executive Officer (“CEO”) and divisional heads.

• Board meetings are held in quarterly basis with a formal agenda on matters for discussion. The Board is kept updated on the group’s activities and operations on a timely and regular basis.

• Periodic review and updates of risk profiles for principal risk and emerging risks both internal and external risks which will potentially derail the achievement of the business goals and objectives.

• Ensure internal audit programme covered identified principal risks. Audit findings throughout the financial period served as key feedback to validate effectiveness of risk management activities and embedded internal controls.

• Reviewed implementation progress of actionable programme, and evaluated post-implementation effectiveness.

the group will continue to enhance the adequacy and effectiveness of the internal control system of the group.

revieW oF the Statement By external auditorS

as required by paragraph 15.23 of the bursa Malaysia securities berhad Main Market Listing requirements, the external auditors have reviewed this statement. their limited assurance review was performed in accordance with recommended practice guide (“rpg ”) 5 (revised) issued by the Malaysian institute of accountants, which does no

Cover 4 B - Rimbunan Sawit Berhadrsb.listedcompany.com/newsroom/Rimbunan_Sawit_Berhad... · 2018....

Documents

Transcript of Cover 4 B - Rimbunan Sawit Berhadrsb.listedcompany.com/newsroom/Rimbunan_Sawit_Berhad... · 2018....